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Mid Cap ETFs Leading the Broad Rally - ETF News And Commentary

Despite the slow start to 2014, the broad U.S. markets regained
momentum of late and are hovering around their multi-year high.
This is primarily attributable to strong corporate earnings, rising
merger and acquisition activities and some reassuring data (read:
Merger Arbitrage ETFs in Focus on Rising Deal
Volume
).

Some concerns over the political and financial stability in some
emerging markets led to a brief pause in the rally early this month
but it appears that the bullish trend for the stocks will remain
intact at least in the near term. This is especially true as the
tension in Ukraine has eased and the hunger for riskier investments
has resurfaced (read:
3 Energy ETFs to Buy on the Ukraine Crisis
).

Investors looking to participate in this broad rally could look at
mid-cap ETFs as these are leading the market higher and mostly
gaining near double digits over the trailing one-month period.
Mid-cap stocks generally offer the best of both worlds, allowing
growth and stability in portfolios.

In fact, these securities are safer options and have the potential
to move higher than the large and small cap counterparts in
turbulent times. While there are several ETFs available in the
space, we have highlighted three ETFs that might not be very
popular and liquid choices but have performed remarkably well.
These have a Zacks Rank of '1' or '2', suggesting further
outperformance in the months ahead.

Any of these could be a compelling choice for investors seeking a
nice momentum play with lower risk (see:
all
the Mid Cap ETFs here
):

This ETF provides targeted exposure to the growth segment of the
U.S. mid-cap space by tracking the S&P MidCap 400 Pure Growth
Index. In total, the fund holds 94 stocks, which are widely spread
across number of securities. Each firm holds less than 2.9% of
total assets.

However, the fund is slightly skewed toward industrials at nearly
22%, closely followed by consumer discretionary (18.72%) and
financials (18.40). The product has amassed $835.3 million in its
asset base while volume is light. The ETF charges 35 bps in annual
fees from investors.

RFG added about 10% over the past month and has a Zacks ETF Rank of
2 or 'Buy' rating with a 'Medium' risk outlook.

This ETF offers exposure to the mid-cap value sector of the U.S.
equity market, by tracking the Morningstar Mid Value Index. The
fund is often overlooked by investors as it has AUM of only $173.4
million and trades in volume of less than 10,0000 shares per day.
Expense ratio came in at 0.30% (read:
3 Top Ranked Mid Cap Value ETFs in Focus
).

Holding 198 stocks in its basket, the fund provides a nice balance
across each security with none holding more than 1.65% share. In
terms of sectors, financials take the top spot at roughly
one-fourth of the total while industrials, utilities and consumer
goods account for double-digit exposure.

The ETF returned over 8.6% over the past one month and has a Zacks
ETF Rank of 1 or 'Strong Buy' rating with a 'Low' risk outlook.

For a slight 'active' choice, investors could consider EZM for
quality exposure. The ETF follows the WisdomTree MidCap Earnings
Index, which measures the performance of the stocks that generate
earnings in the mid-cap universe. This results in a robust
portfolio of 609 stocks, giving investors wide exposure across the
cap level as no single company accounts for more than 1.3% of
assets.

From a sector look, financials and industrials account for the
largest share of 23.26% and 20.19%, respectively. Consumer
discretionary and information technology receive double-digit
allocations as well. The product has managed assets of about $481.6
million so far while sees light volume.

While it is true that small caps have also been soaring and are
approaching their all-time highs, mid-cap funds are currently
outperforming and are arguably better plays. This is because the
mid-cap space has been a solid performer relative to other cap
level funds in the year-to-date time frame and over the long term.

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